A number of developments in early 2013, including the long deadlock in Italian politics following the March elections, and the brinksmanship surrounding the EU bailout for Cyprus’s banking system, were notable specifically because of the muted market reaction they elicited. These events were generally understood to be negative developments on the world stage, but for the most part the markets took them both in stride.

As recently as a year ago, such developments would have been much more likely to spark a widespread selloff with a concurrent flight to U.S. Treasuries — a pattern that markets experienced often during the past few years. The fact that investors have remained more focused on longer-term opportunities rather than the short-term news cycle suggests to us that they are much more attuned to the potential opportunity costs of remaining on the sidelines.

We believe this type of environment — one in which declining interest rates are not the primary driver of returns and the risk-on/ risk-off trade does not overshadow fundamentals in the market — provides an abundance of opportunities for active managers.